New Delhi — : India is preparing a strategic policy shift that will give foreign companies access to a slice of its massive public procurement market, with the United States poised to be the first major beneficiary. According to high-level government sources, New Delhi is set to allow American firms to compete for contracts worth up to $50 billion (₹4.30 lakh crore) under a framework similar to its recent Free Trade Agreement (FTA) with the United Kingdom.
US Firms to Tap into Central Government Contracts Worth ₹4.3 Lakh Crore
As part of a new trade agreement currently under negotiation, the Indian government will permit US-based companies to bid on public contracts awarded by central government agencies. The scope will exclude contracts issued by state governments and local authorities—for now. This change is expected to create unprecedented commercial access for American enterprises, potentially reshaping the foreign investment landscape in India’s public sector.
India’s total annual public procurement market—covering the central and state governments, as well as public sector undertakings—is estimated at $700–750 billion. Until now, most of this market has been heavily restricted to domestic firms, with 25% of all procurement mandatorily reserved for micro and small enterprises (MSEs). Foreign participation is typically permitted only in critical sectors such as defense and railways, and only when domestic alternatives are unavailable.
Strategic Move Follows Landmark FTA with the United Kingdom
The upcoming India-US trade deal follows closely on the heels of India’s Free Trade Agreement with the UK, signed earlier this month. That agreement allowed British companies access to selected Indian government procurement contracts, and vice versa, marking the first time India has opened this domain on a reciprocal basis.
According to a senior official involved in trade negotiations, “This move reflects a significant policy transformation. India is now prepared to selectively open its public procurement to other trading partners as part of bilateral negotiations. However, this will be done in a phased and carefully reciprocal manner.”
Why This Matters: Trade, Competition, and Small Business Protection
The Indian government has not signed the WTO’s Government Procurement Agreement (GPA), mainly due to concerns over protecting domestic small and medium enterprises (SMEs). However, by crafting custom bilateral deals, India is looking to strike a balance between economic liberalization and domestic market safeguards.
The U.S. government has repeatedly criticized India’s government procurement policies, labeling them as restrictive and protectionist. This new move addresses some of those concerns while retaining core protections for India’s MSEs.
Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), stated, “The government has assured us that 25% of public procurement will remain reserved for Indian small businesses. That gives us confidence. And it’s encouraging that Indian companies will now have new opportunities to compete in the U.S. government contracts as well.”
Negotiations Progressing: Trade Deal Expected by July
Indian Commerce Minister Piyush Goyal visited the United States this week to finalize the details of the trade agreement. According to officials close to the talks, an interim deal may be signed by early July, with both nations agreeing to open certain government contracts on a reciprocal basis.
The phased approach is seen as a test run for broader liberalization, and depending on its success, other trade partners like the EU, Japan, and Australia may also be offered similar reciprocal access in the future.
Implications for Global Companies Eyeing India’s Public Sector
With over $700 billion in annual public procurement, India represents one of the largest untapped government contract markets in the world for foreign businesses. Allowing American firms access to just a fraction of this market—$50 billion initially—can reshape global supply chains, attract technology investments, and enhance infrastructure development in India.
This move also positions India as a more globally integrated economy, aligning with its broader goal of becoming a $5 trillion economy in the coming years. At the same time, by ring-fencing local procurement for small businesses, the government ensures that the domestic ecosystem remains protected and competitive.
India Balances Growth with Domestic Interests in Landmark Trade Policy Shift
As the trade pact with the United States inches closer to finalization, India is signaling its readiness to open key economic sectors without compromising its domestic priorities. The selective, reciprocal access to public procurement marks a watershed moment in India’s trade policy and could pave the way for a new era of mutually beneficial international partnerships.
